Volume 3 Number 6 June 2024 E-ISSN: 2963-2900 | P-ISSN: 2964-9048 https://jmi.rivierapublishing.id/index.php/rp

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Threats and Opportunities For Textile and Other Textile Products (TPT) in The Efta Market Using The Indonesia-Efta Scheme
Kayla Putri Arvina
Fakultas Ekonomi Dan Bisnis, Universitas Padjadjaran, Jatinangor
Email:
[email protected]
Abstract
This thesis examines the problems and
opportunities faced by the Indonesian textile and textile products (TPT)
industry in the European Free Trade Association (EFTA) market through
implementing the Indonesia-EFTA scheme. The analysis tool used is Revealed
Comparative Advantage (RCA), which allows the detection of relative comparative
advantages in Indonesia's textile exports to the EFTA market. The report
highlights various important aspects that affect Indonesia's textile
competitiveness in the market, including trade rules, quality requirements, and
consumer trends. The results of the RCA analysis provide in-depth insight into
the relative position of Indonesian TPT in the EFTA market, as well as the
potential for sector development in the context of the Indonesia-EFTA trade
agreement. These findings can provide a framework for government policies and
business strategies for textile industry players to take advantage of
opportunities and address challenges in strengthening their competitiveness in
the EFTA market.
Keywords: Challenges, Opportunities, Textiles, Textile
Products, EFTA, Indonesia-EFTA, Revealed Comparative Advantage (RCA).
INTRODUCTION
Background
International
trade refers to exchanging goods and services between countries, involving
exports (goods sent to other countries) and imports (products received from
other countries). The main goal of international trade is to improve a nation's
standard of living by encouraging economic growth, creating job opportunities,
supporting the industrial sector, and attracting international corporate
investment. Nevertheless, when participating in global trade, countries
inevitably face obstacles that often result in an inability to achieve the
benefits of international trade.
Today,
international trade is generally characterized by a preference for free trade,
usually facilitated through bilateral or multilateral cooperation. Agreements
are often formed with the primary purpose of ensuring that all obstacles are
then removed for the parties involved. A country's trade operations directly
impact the rate of global economic growth. The wider a country's trade
activities, the faster the global economic growth.
To
boost Indonesia's international trade between 2019 and 2024, the country is
prioritizing four key areas: strengthening economic diplomacy, protecting
national interests through diplomacy, asserting sovereignty and national
interests through diplomacy, and enhancing Indonesia's influence and leadership
in the global and regional arenas. In addition, there is a special focus on
infrastructure improvements and diplomatic efforts. Indonesia's main focus in
its foreign policy is economic diplomacy, actively contributing to national
economic growth and development.

The graph
below illustrates Indonesia's significant economic growth in 2024, with
considerable increases observed from 2021 to 2022. Indonesia's economic
development showed a downward trend in 2022 but stabilized in 2023 and 2024.
Thanks to the stability observed in 2023 and 2024, Indonesia's economic
development is expected to remain stable until 2025.
Figure 1. 1 Indonesia's Economic Growth
Projections 2024-2025
Source:
IMF (January 2024), World Bank (January 2024), and OECD (November 2023)
The IE-CEPA EFTA agreement has helped the
textile industry, which is believed to have promising market prospects, even
though competition is fierce between ASEAN countries and the world.
Based on the previous description of the
impact of the growth of the Textile and Textile Products Industry in Indonesia,
the research was conducted under the title "Challenges and Opportunities
of Textiles and Textile Products (TPT) in the EFTA Market Using the
Indonesia-EFTA Scheme."
Problem
Formulation
1.
What are the challenges of textiles and other textile products (TPT) in West
Java in exporting to the markets of EFTA member countries?
2.
What are the opportunities for West Java textiles and other textile products
(TPT) to export in the EFTA Market?
Purpose
of the Problem
1.
To find out the challenges of textiles and other textile products (TPT) in West
Java in exporting to the markets of EFTA member countries.
2.
To analyze the opportunities for West Java textiles and other textile products
(TPT) to export in the EFTA Market.
Research
Benefits
This research is needed to make a useful
contribution to scientific development and practical needs. The benefits of the
research can be described as follows:
1.
Business actors or exporters of textiles and other textile products (TPT) in West
Java
as a source of information and media that
can be a reference for increasing the productivity of Indonesian textile
exports to EFTA countries.
2.
Colleges and Students
This research is expected to clarify the
policy of the Indonesia-EFTA free trade agreement the comprehensive economic
partnership agreement between Indonesia and EFTA, and can also be used for
further research.
3.
Government
This research is expected to be one of the
fundamental aspects in business political decisions towards the textile
industry to increase the sector's productivity in Indonesia.
4.
Community
This research is expected to expand a more
comprehensive understanding and provide information that can be used to
understand the export trade of the textile sector after the establishment of
the Indonesian European Comprehensive Economic Partnership Agreement (IE-CEPA).
RESEARCH METHODOLOGY
The author uses a
descriptive and qualitative approach to explain current issues in this section.
This study aims to obtain descriptive data by analyzing data from several
sources, including primary and secondary sources. Data sources include
documents, media coverage, views from stakeholders involved in international
trade agreements, as well as previous research related to free trade agreements
between Indonesia and Europe within the Indonesia-EFTA framework and their
impact on the agricultural sector in Indonesia.
Type of Research
The research
methodology used in this thesis is a qualitative case study. A case study is a
research approach that collects and analyzes data related to a specific event
or situation (Hardani et al., 2020). The main objective of the qualitative
approach in this study is to obtain a thorough understanding of various
phenomena, including behaviors, perceptions, motivations, and activities
observed in the research subjects. The data produced is qualitative and
expressed in words rather than numbers. Qualitative research provides benefits,
especially theoretically, that contribute to the advancement of knowledge.
However, the study also has practical significance for problem-solving
purposes. The main methods used to collect data are triangulation and inductive/qualitative
data analysis, focusing on relevance rather than generalization.
Research Location
The research site is
where researchers make observations to collect relevant data in the research
context. The researcher has chosen West Java Province as the research area and
the Bandung Free Trade Agreement Center as the institution that is the focus of
the research. The selection of West Java Province is based on its potential as
a producer of popular textile commodities spread across various regions in the
province. In addition, West Java Province is also known as a consultation area
for export and import activities in Indonesia, which is generally identified as
the Free Trade Agreement Center Bandung.
Research Time
Table 1. Research Time Plan
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Data
Collection Techniques
Various
data collection strategies were used in qualitative descriptive studies to
understand the implementation of IE-CEPA EFTA in the textile sector. The
textile business is faced with regulatory issues due to the formulation of the
current problem. This can be solved by using methods such as observation,
documentation, and literature review. The analysis of the comparative
advantages revealed focuses on potential opportunities for the textile industry
in countries that are members of the European Free Trade Association (EFTA). By
integrating these three methodologies, the study can generate extensive data to
assist in analyzing the application of IE-CEPA EFTA in the textile industry.
Data
Analysis Techniques
This
study uses qualitative analysis as a data analysis technique, especially using
Sugiyono's theory, which is described in the book "Qualitative Research
Methods" published in 2014. Regarding the implementation of the
declaration of origin of goods and preferential tariffs in the IE-CEPA
agreement, as well as the utilization of the IE-CEPA trade agreement by the
textile industry in West Java, the data analysis process will include similar
steps in collecting, subtracting, presenting, and drawing conclusions from
relevant data. The main focus of this analysis will be on the implications of
trade policies for the textile industry in West Java and its access to the EFTA
market, as determined by the researchers. Therefore, the necessary data
analysis methodology includes several stages.
RESULTS AND DISCUSSION
Analysis
of West Java TPT Opportunities in the EFTA Market
Description
of Opportunity Data Analysis Techniques
The
data analysis technique used is Revealed Comparative Advantage (RCA). The World
Bank said that this technique is an analytical technique used to measure the
value of a country's export potential. This method is based on relative export
share, whe ratio between the export value of a country's products and those
worldwide. The RCA indicates whether a country is expanding products with trade
potential, compared to a situation where the number of products that can be
exported competitively is static. Countries with similar RCA profiles will
likely not have high bilateral trade intensity unless it involves
intra-industry trade. This research usually uses export, import, and production
data, which are absorbed from secondary data sources such as UN Comtrade, World
Development Indicators, and Regulation of the Minister of Finance. To calculate
RCA, the equation is used:

Information:
Where
x represents exports, i represents countries, f is a commodity, t is a set of
commodities, and n is a group of countries
-���������� Xij = Commodity exports of a country
j
-���������� Xit = Export of all goods of a
country t
-���������� Xnj = World commodity exports j
-���������� Xnt = Export of all the world's goods
The
product or country competes strongly in the international market if the RCA is
more than one (> 1). The competitive advantage is weak if the RCA number is
less than one (< 1).
Data
Analysis
West
Java Trade Balance
Table
2.
West Java Trade Balance (in US$ Million) for the 2019-2023 Period

Source: Central Statistics
Agency, by the Data and Information Systems
Center of the Ministry of Trade
The
development of West Java's trade balance can be seen in the table above, and it
is stated that the non-oil and gas sector is a considerable contributor
compared to the oil and gas sector. West Java's trade value peaked in 2022,
with a total trade of US$ 44,425,100. However, there was a decline from 2022 to
2023, with a total trade of US$ 1,836,000. Despite the decline, the total
development of non-oil and gas trade in West Java has increased since the
pandemic. With quite rapid growth, it can be seen that the quantity of non-oil
and gas trade has also increased.
Indonesia's
Trade Balance to EFTA Countries
With
the selection of the Indonesia-EFTA Comprehensive Economic Partnership
Agreement, the opportunities for partner countries to be analyzed are
Switzerland, Iceland, Norway, and Liechtenstein. The following is the
Indonesia-EFTA state trade balance:
Table 3. Indonesia-EFTA Trade
Balance

Source: Central Statistics Agency, processed
by the Data Center and Information Systems of the Ministry of Trade
The
non-oil and gas sector plays a bigger role than oil and gas, both in terms of
exports and imports. It comprises agricultural exports, processing industries,
manufacturing products, and textiles.
Export-Import
of Textiles and Other Textile Products (TPT) in West Java
Table 4. TPT Exports in West Java

Source: Central Statistics
Agency of West Java
The
development of textile and other textile product exports (TPT) in West Java is
very diverse. Starting from HS CODE 50 with silk to HS CODE 63 with patchwork.
The table above shows that HS CODE 61 with knitted goods continues to hold the
highest position from 2019-2023. Usually, knitted goods are exported to
countries with winter continents, such as Europe, North America, South America,
and even Australia. Followed by HS CODE 62 with non-knitted apparel. The
Ministry of Trade said that the destination countries for apparel exports from
Indonesia from 2018-2023 are the United States, Europe, Japan, Germany, and
South Korea. This trend will continue in 2023, when the value of apparel
exports to the United States will reach USD 1.07 billion or 53.48% of total
apparel exports from Indonesia. In the January-March 2023, Central Java and
West Java are Indonesia's main apparel exporting provinces. Apparel exports
from West Java reached USD 784.15 million, or around 39.14% of Indonesia's
total apparel exports.
Indonesian
exports to EFTA
Table
5.
Indonesia's Exports to EFTA

Source: ITC calculations
based on UN COMTRADE and ITC statistics
The
IE-CEPA agreement is Indonesia's first trade agreement with countries on the
European continent. In the textile and other textile products (TPT)
association, it can be seen that HS CODE 61 and 62 with knitted goods and
non-knitted apparel occupy the highest position with the highest export value
in 2021 with a total value of US$ 95,624 out of a total export of 1,971,783.
However, the highest value of Indonesia's textile exports to EFTA is in 2023,
totaling US$ 3,311,996. In that year, non-knitted apparel exports decreased,
but textile exports with other HS CODES also increased. Thus, the total export
value of textile products from Indonesia to EFTA is the highest in 2023.
Import
Indonesia to EFTA
Table
6.
Import Indonesia to EFTA

Source:
ITC calculations based on UN COMTRADE and ITC statistics
In
addition to exports, Indonesian textile products are also imported from
countries in EFTA. Table 24 says that HS CODE 59, which is coated woven fabric,
is the most imported good from EFTA countries to Indonesia. In addition, the
highest value of Indonesia's imports from EFTA was in 2020, with a total of
US$732,980. Meanwhile, the lowest import value was last year, namely 2023, with
a total import value of US$622,308.
Indonesia's
Textile and Other Textile Products (TPT) Exports to the World
Table
7.
Indonesia's TPT Exports to the World

Source:
ITC calculations based on UN COMTRADE and ITC statistics
Like
textile exports to EFTA countries, Indonesia's highest textile exports
worldwide are also occupied by HS CODE 61 and HS CODE 62. The total value of
all TPT products (HS code 50-63) was US$291,979,103 in 2022. In the table
above, the highest export value of products is occupied by HS CODE 62, with
non-knitted apparel of US$4,901,170.
World
Exports to the World
Table
8.
World Exports to the World

Source:
ITC calculations based on UN COMTRADE and ITC statistics
Of
course, exports from the world to the world have a much higher export value
than Indonesia's exports to the world. When viewed from the "all
products" line, it can be concluded that textile product exports continue
to increase from 2018 to 2022. Of course, this is a good sign for textile
exporters. TPT business actors can see good opportunities with a significant
trend increase from year to year. This is a great opportunity to export TPT in
even larger quantities.
Indonesian
Imports from the World
Table
9.
Indonesian Imports from the World

Source:
ITC calculations based on UN COMTRADE and ITC statistics
����������� Similar to imports from EFTA
countries, Indonesia also carries out import activities from other countries.
For textile products, in 2022, Indonesia made the highest Export in HS CODE 52,
namely cotton products, with a total import value of US$2,243,500. The lowest
import in HS CODE 51 was animal hair, which was US$3,021.
World
Imports from the World
Table
10.
World Imports from the World

Source:
ITC calculations based on UN COMTRADE and ITC statistics
Table
28 shows data on world textile and other textile products (TPT) imports.
Imports of textile products have always increased from 2018 to 2022. In 2022,
the TPT products that carry out the most import activities are in HS CODE 61,
with knitted goods amounting to US$264,077,157.
Analysis
of Research Results
RCA
ANALYSIS
Revealed
Comparative Advantage (Indonesia), 2020, 2021, 2022
Table
11.
Revealed Comparative Advantage (Indonesia), 2020, 2021, 2022

The
data set collected and analyzed using the revealed comparative advantage (RCA)
method provides information that in 2022, Indonesian products with the highest
export competitiveness to EFTA countries are HS CODE 55, namely Artificial
Stafel Fiber with a score of 3,709. This product is highly competitive due to
the low import value from Indonesia to the world for these products. In 2021,
this product has soaring competitiveness with an RCA value of 4.22. The RCA
value shows that artificial staple fiber products have above-average
comparative competitiveness compared to other products. This is due to the
large demand for imports worldwide compared to the total imports of all textile
products. From the results of the calculation using the revealed comparative
advantage method, it can be seen that textile products
in West Java province in 2020-2022 have weak competitiveness or < 1 and
strong competitiveness > 1 as follows:
Table
12.
Competitiveness of West Java TPT Products Worldwide

With
an RCA value of more than 1, it can be concluded that West Java textile
products are highly competitive worldwide, such as HS CODE 55, the name of
artificial staple fiber products. Meanwhile, the products with the lowest
competitiveness are wool animal hair with HS CODE 51.
Bilateral
Revealed Comparative Advantage (Indonesia), 2020, 2021, 2022
Table
13. 14
Bilateral Revealed Comparative Advantage (Indonesia), 2020, 2021, 2022

Table
4.20 shows the analysis of the competitiveness of West Java TPT products in
EFTA. The highest average is owned by HS CODE 62 with non-knitted apparel. From
the existing data, it is analyzed and re-concluded which products have high and
low competitiveness, as shown in the table below.
�� �
Table 14. 15
Competitiveness of West Java TPT Products in EFTA Countries (2020-2022)

From
the results of the Bilateral Revealed Comparative Advantage (BRCA) calculation,
it can be seen that the Export of textile products in West Java province to
EFTA countries from 2020 to 2022, which has the highest competitiveness, is HS
CODE 62 with non-knitted apparel. Meanwhile, the products with the lowest
competitiveness are rugs, knitted fabrics, special woven fabrics, textile
fibers, paper goods, and wool and animal hair. It can be concluded that, to
export textiles to EFTA countries, Indonesian business actors or exporters must
prioritize goods included in "Non-Knitted Apparel" with HS CODE 62.
From the RCA bilateral analysis, the product is the highest value and the only
product with an RCA value of > 1 with a final value of 1,500. In a sense,
among textile products exported to EFTA countries, "Non-Knitted
Apparel" is the product that has the highest export opportunities.
�� Implementing the IE-CEPA agreement is
accompanied by three implementing regulations, namely Regulation of the
Minister of Trade No. 58 of 2021 concerning Indonesia's Rules of Origin in
Indonesia-EFTA Regulation of the Minister of Finance No. 152/PMK.010/2021
concerning the Determination of Import Duty Tariffs in the Context of the
Comprehensive Economic Partnership Agreement between the Republic of Indonesia
and EFTA Countries and Regulation of the Minister of Finance No.
122/PMK.04/2021 concerning Procedures for Imposing Import Duty Tariffs for
Imported Goods Based on the Comprehensive Economic Partnership Agreement
between the Republic of Indonesia and EFTA Countries. With the IE-CEPA
agreement that benefits both parties, import duties for textile exports are
abolished, and the tariffs imposed are 0 percent. Small and medium business
actors must also know the profits obtained and the existence of a large open
market for textile products.
POTENTIAL
MARKET ANALYSIS
From
the available data, the author can calculate the "potential market
analysis" from the 2022 data by subtracting the total value of EFTA
imports from the world from the value of exports from Indonesia and West Java
to the world. The potential market for TPT from Indonesia and West Java is
obtained with this calculation. The results of the calculation show that the
largest export potential of West Java is in HS Code 62 (Non-Knitted Apparel),
with a total of 4,331,761.1. On the other hand, the largest potential market
from Indonesia is HS Code 63 (Fabric).
Table 15. 16 Potential
Market Analysis

CONCLUSION
The study results show that the challenges of
exporting textile products to EFTA countries are based on the regulation of
textile export requirements, which are quite complicated. However, several supporting
factors also exist, including competition from neighboring countries (Viet Nam)
with a lower minimum wage than Indonesia. This is one of the crucial things in
carrying out export activities. Vietnam can determine lower prices.
Infrastructure, transportation access, and even tools and machines are not
looked at by the government, making Indonesian textile products difficult to
compete in in quantity and quality. Moreover, many business actors do not know about the
existence of EFTA, especially the IE-CEPA agreement that has come into effect.
Opportunity analysis was carried out by revealing comparative advantage,
bilateral comparative advantage, and potential market analysis.� The results of the revealed comparative
advantage show that the five textile products with the highest competitiveness
start from HS Code 55 (Artificial Stafel Fiber), HS Code 62 (Non-Knitted
Apparel), HS Code 61 (Knitted Goods), HS Code 54 (Artificial Filament), HS Code
52 (Cotton). Meanwhile,
Indonesian TPT products with the lowest competitiveness are occupied by HS Code
51 (Wool, Animal Hair), HS Code 50 (Silk), HS Code 53 (Textile Fibers and Paper
Goods), HS Code 63 (Patchwork), HS Code 57 (Rugs). In addition to the RCA
analysis of West Java TPT products, the author conducted a competitive analysis
of West Java TPT products in the EFTA market. The five textile products with
the highest competitiveness start from HS Code 62 (Non-Knitted Apparel), HS
Code 61 (Knitted Goods), HS Code 55 (Artificial Stafel Fibers), HS Code 52 (Cotton),
HS Code 63 (Patchwork). Meanwhile, West Java TPT products with the lowest
competitiveness start from HS Code 51 (Wool, Animal Hair), HS Code 53 (Textile
Fibers and Paper Goods), HS Code 58 (Special Woven Fabrics), HS Code 60
(Knitted Fabrics), and HS Code 57 (Rugs). The author also gets the market
potential value for textile exports from West Java and Indonesia from the
existing data. The study results show that the West Java market has the
greatest potential in HS Code 62 (Non-Knitted Apparel), while the Indonesian
textile market has the greatest potential in HS Code 63 (Patchwork Fabric).
Therefore, it can be concluded that the results of the analysis show that West
Java's textile exports have declined because the national textile industry has
suffered a blow in the global market and the domestic market caused by a
decline in world demand due to the global recession so that export demand fell
by 40-50% throughout the first quarter of 2023. Complaints about imported
textile products flooding the domestic market are dominated by imported goods,
especially from China. Reforms from the Minister of Cooperatives and SMEs said
that illegal imported used clothes control 31% of the domestic clothing market.
The Indonesian Fiber and Filament Yarn Producers Association revealed that
there are many irregularities in textile imports with various
"modes," starting from the transfer of HS CODE, falsification of
information of the origin of goods, to "under invoice," which is the
value of the invoice is reduced to avoid paying taxes. Many unlicensed and
unregistered import companies abuse import permits to smuggle imported goods.
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